Pages

Tuesday, 5 July 2011

Internet and the world economy

Worldwide there are 2 billion internet users and the turnover of e-commerce is $8 trillion p.a., which is three times the entire GDP of the UK.

James Manyika (San Francisco) and Charles Roxburgh (London) of the McKinsey Global Institute studied the economic effects of the Internet on 13 countries, including the G8 and presented their findings in a recent report: Internet matters: the net’s sweeping impact on growth, jobs and employment.

Here are some of the main points reported in the July issue of Prospect magazine.

The Internet accounts on average for 3.4% of the GDP of a country

Half of this GDP component arises from buying online and paying for advertising. Much of the rest comes from investments in Internet technology: servers, software and communications.

Over 1995-2009, i.e. 15 years, the GDP of the 13 countries of course increased; but 10% of this growth was due to the Internet. Over 2005-2009 the Internet component of growth was 21%. So its impact on growth appears to be accelerating.

4,800 small and medium sized enterprises studied reported on average a 10% increase in profitability due to efficiency improvements

These same companies claimed that 2.6 jobs were created for each one lost to technology-related efficiencies

The Internet of course raises questions outside the scope of the report.What kinds of jobs have been created? What have been the social effects? Is there an underclass of people with no prospect of linking into the prosperity engine? Has creative thought been enhanced or diminished? Has the sustained development of an idea and its application been undermined or enhanced? Are games distorting or improving our perceptions of the real world? What has been the effect on democracy? Is there more sectarianism? There are many more questions.

The Internet has proved powerful and world changing beyond anyone’s dreams but, like the recently unleashed power of atomic physics, quantum mechanics, materials science, biotechnology and genetic engineering, it is morally neutral.

We human beings are faced with the choice of using it for good or evil. Perhaps the first step is to recognise that good and evil exist.